The Administration's Bi-Polar Approach to ACA Marketplace

In the span of less than 12 hours last week, the Trump administration took two seemingly contradictory actions that could have profound effects on the insurance marketplaces set up by the Affordable Care Act.

First, officials issued guidance Monday morning that could weaken the exchanges set up for people who buy their own insurance. The new approach makes it easier for states to get around some ACA requirements, including allowing the use of federal subsidies for skimpier plans that can reject people with preexisting conditions.

Yet, the other move — a proposed rule unveiled Monday evening — could bolster ACA marketplaces by sending millions of people with job-based coverage there, armed with tax-free money from their employers to buy individual plans.

Both efforts play into the parallel narratives dominating the bitter political debate over the ACA.

The administration, frustrated that Congress did not repeal the law, say some critics and policy experts, is working to undermine it by weakening the marketplaces and the law's consumer protections. Those efforts make it easier for insurers to offer skimpier policies that bypass the law's rules, such as its ban on annual or lifetime limits or its protections for people with preexisting conditions. Congress also zeroed out the tax penalty for not having coverage, effective next year. Combined, the moves could reduce enrollment in ACA plans, potentially driving up premiums for those who remain.

The administration and Republicans in Congress say they are looking to assist those left behind by the ACA — people who don't get subsidies to help them buy coverage and are desperate for less expensive options — even if that means purchasing less robust coverage.

"These are people who were buying insurance before [the law] and then the rules changed and they could not buy it because they could not afford it," said Joe Antos, a resident scholar at the conservative American Enterprise Institute. "They have been slowly dropping out of insurance coverage altogether."

The efforts are dramatically reshaping the ACA and the individual insurance market to one that looks more as it did before the 2010 law, when regulation, coverage and consumer protections varied widely across the country.

"Some states will do everything they can to keep individual markets strong and stable. Others won't," said Sabrina Corlette, research professor at the Center on Health Insurance Reforms at Georgetown University.

So what expectations should consumers have? Here are three key takeaways:

Protections for preexisting health problems are uncertain.

Polls show that keeping the ACA's guarantees on coverage for people with medical problems is a top concern for Americans, and Democrats have made their defense of the health law a key part of their midterm election campaigns.

Republicans have gotten that message and even those who voted to repeal the ACA or joined a lawsuit by 20 red states to overturn it now say they want to protect people with preexisting conditions. Still, GOP lawmakers have not introduced any plan that would be as protective as the current law.

In August, the administration released a rule allowing expanded use of short-term plans, which are less expensive than ACA policies. To get those lower prices, most of these plans do not cover prescription drugs, maternity care, mental health or substance abuse treatments.

The move is unlikely to benefit people with health problems, as short-term plans can reject people with preexisting conditions or decline to cover care for those medical problems.

Under the rule, insurers can sell them starting in 2019 for up to a year's duration, with an option to renew for up to three years, reversing an Obama-era directive that limited them to 90 days.

Administration officials estimate such plans could draw 600,000 new enrollees next year, and others have estimated the numbers could be far higher. The concern is if many healthy people in 2019 switch out of the ACA market and choose short-term plans, premiums will rise for those who remain, including those with preexisting conditions or make the ACA market less attractive for insurers.

Where you live matters more.One of the biggest changes ushered in with the ACA was a standard set of rules across all states.

Before the law took effect, consumers buying their own coverage saw tremendous variation in what was offered and what protections they had, depending on the state where they lived.

Most states, for example, allowed insurers to reject people with medical conditions. A few states required insurers to charge similar premiums across the board, but most allowed wide variations based on age, gender or health. Some skimpy plans didn't cover prescription drugs, chemotherapy or other medical services.

By standardizing the rules and benefits, the ACA barred insurers from rejecting applicants with medical conditions or charging them more. Women and men get the same premium rates and insurers could charge older people no more than three times what they charged younger ones.

Under the new guidance issued this week giving states more flexibility on what is offered, consumers could again see a wide variation on coverage, premium rules and even subsidy eligibility.

"It shifts pressure to state politicians," said Caroline Pearson, a senior fellow at NORC, a nonpartisan research institution at the University of Chicago. That could play into the calculus of whether a state will seek to make broad changes to help people who cannot afford ACA plans, even if the trade-off affects people with medical conditions.

"You risk making some worse off by threatening those markets," said Pearson. "That is always going to be hard."

Millions more will join the "buy-your-own" ranks.The proposed rule released Tuesday allows employers to fund tax-free accounts — called health reimbursement arrangements (HRAs) — that workers can use to buy their own coverage on the ACA marketplaces.

The administration estimates about 10 million people would do so by 2028 — a substantial boost for those exchanges, which policymakers say never hit the enrollment numbers needed to attract enough insurers and hold prices down.

John Barkett, senior director of policy affairs at Willis Towers Watson, a benefits consulting firm, said he expects employers to "seriously consider" the new market. The infusion of workers will improve options by attracting more insurers, he added.

"These people coming in will be employer-sponsored, they'll have steady jobs," Barkett noted, and will likely stick with coverage longer than those typically in the individual market.

Currently more than 14 million people buy their own insurance, with about 10 million of those using federal or state ACA marketplaces. The others buy private plans through brokers.

The proposed rule won't be finalized for months, but it could result in new options by 2020.

If these workers seeking coverage are generally healthy, the infusion could slow premium increases in the overall ACA marketplace because it would improve the risk pool for insurers.

But, if employers with mainly higher-cost or older workers opt to move to the marketplaces, it could help drive up premiums.

In an odd twist, the administration notes in the proposed rule that the ACA has provisions that could protect the marketplace from that type of adverse selection, which can drive up prices. But most of the protective factors cited by the rule have been weakened, removed or expired, such as the tax penalty for being uninsured and the federal subsidies for insurers to cover lower deductibles for certain low-income consumers.

Benefits consultants and policy experts are skeptical about how many companies will move to the HRA plan, given the tight labor market. Continued uncertainty about the fate of the ACA marketplace may keep them reluctant to send workers out on their own, they say.

Health benefits are a big factor in attracting and retaining workers, said Chris Condeluci, a Washington attorney who previously worked for Sen. Chuck Grassley (R-Iowa) and served as counsel to the Senate Finance Committee during the drafting of the ACA.

"Most employers believe their group health plan will provide better health coverage than an individual market plan," he said.

Kaiser Health News is a nonprofit news service covering health issues. It is an editorially independent program of the Kaiser Family Foundation, which is not affiliated with Kaiser Permanente.